Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

Tax Benefits of Charitable Giving

Christmas is the time of year to be a little selfless and dig deep for worthwhile charitable causes. Self-assessment tax payers can also benefit as charitable giving reduces their bill

Emma Wall 8 December, 2014 | 1:16PM

This article is part of Morningstar’s Guide to Financial Planning, your handbook for making the most of your tax-free investing opportunities, reducing your annual – and lifetime – tax bill while keeping HMRC onside.

Listen up – now is the time to make gifts to charity. Not just because of Christmas appeals, but because of tax deadlines too. It may seem a rather utilitarian approach – but if you empty your pockets for well-deserving trusts now you will reap the benefits too. When making a donation to charity, fill out the Gift Aid form to boost the amount of cash the charity receives and reduce your income tax bill.

Richard Citron of BDO says: “If you have a favourite charity, consider making Gift Aid donations before January 31 to provide an early benefit to the charity and elect for the donation to be treated as made in 2013/14 to accelerate tax relief.”

It is not just cash you can gift to charity either, stock market listed shares you no longer want can be passed onto a charity generating income tax relief for you rather than triggering a Capital Gains Tax liability.

For share holdings that have fallen in value or a too few a number to warrant trading gifting to charity is a particularly attractive option.

“However, if the asset is standing at a paper loss, it may be better to sell it first to crystallise the loss, which you can set against later gains, and simply claim tax relief on the gift of the sale proceeds to the charity,” says Citron.

ShareGift.org, the website for The Share Donation Charity has further information about the process. Since 1996, the charity has given £18.5 million to more than 2,000 charities. All donors are asked for charity suggestions, regardless of the size of the share gift and these suggestions determine the donations.

Gifts made to European Union registered charities, irrespective of their size, are immediately exempt from inheritance tax. 

“Gifting to charity within your will can also be very efficient, and which is the best option will depend on your circumstances and the amount you wish to gift.  A financial adviser would be able to help decide which is the best option for you,” recommends head of estate planning for financial firm Towry Ian Dyall.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites